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The Rise, Fall and Stabilization of U.S. Inflation: Shifting Regimes and Evolving Reputation


  • Robert G. King
  • Yang K. Lu


The rise, fall, and stabilization of US inflation between 1969 and 2005 is consistent with a model of shifting policy regimes that features a forward-looking New Keynesian Phillips curve, policymakers that can or cannot commit, and private sector learning about policymaker type. Using model-implied inflation forecasting rules to extract state variables from the inflation forecasts in the Survey of Professional Forecasters, we provide evidence that policy regimes without commitment prevailed before 1980 and regimes with commitment prevailed afterward. With theory and quantification, we find that evolution of reputational capital is central to understanding the behavior of inflation.

Suggested Citation

  • Robert G. King & Yang K. Lu, 2021. "The Rise, Fall and Stabilization of U.S. Inflation: Shifting Regimes and Evolving Reputation," NBER Working Papers 29585, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:29585
    Note: EFG

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    Cited by:

    1. Mark Setterfield & Robert A. Blecker, 2022. "Structural change in the US Phillips curve, 1948-2021: the role of power and institutions," Working Papers 2201, New School for Social Research, Department of Economics.
    2. Gilberto Tadeu Lima & Mark Setterfield & Jaylson Jair da Silveira, 2023. "Achieving two policy targets with one policy instrument: heterogeneous expectations, countercyclical fiscal policy, and macroeconomic stabilization at the effective lower bound," Working Papers 2301, New School for Social Research, Department of Economics.
    3. Gáti, Laura, 2023. "Monetary policy & anchored expectations—An endogenous gain learning model," Journal of Monetary Economics, Elsevier, vol. 140(S), pages 37-47.
    4. Philipp Heimberger, 2021. "Do higher public debt levels reduce economic growth?," FMM Working Paper 74-2021, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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